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Global fintech investment rockets to a record $111.8bn in 2018

Global fintech investment rockets to a record $111.8bn

Investment driven by mega deals: KPMG Pulse of Fintech.

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Kelli O'Malley

Communications Manager

KPMG in Ireland

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  • Ireland benefitting from increased interest from companies looking to establish a European market presence
  • 13 deals in Ireland during 2018, totalling €36.2m

Dublin, 20 February, 2019 - Global fintech funding rose to US$111.8 billion in 2018, up 120 percent from US$50.8 billion in 2017, fueled by mega M&A and buyout deals, according to the latest global KPMG Pulse of Fintech report.

The report shows that Ireland saw increasing interest from companies looking to establish a European market presence.  Many of these investments chose Ireland in an effort to negate Brexit-related concerns.  One report* showed that over 55 fintech or financial services companies established a presence in Ireland during the year, estimating that over 4,500 jobs would be created as a result.  At year end, the Central Bank of Ireland had worked through approximately half of the 100 plus applications for authorisation.  Applications were received from almost every financial services sector including banking, insurance, asset management and payments.

“In 2018, we’ve seen a lot of financial services companies and fintechs establish operations or grow their footprint in Ireland” said Anna Scally, Partner and Fintech Lead, KPMG in Ireland.  “Traditionally these companies may have built their businesses in the UK but are choosing Ireland because of the Brexit uncertainty. Many of these companies are working with the Central Bank of Ireland to obtain licences that will enable them to continue to deliver their products and services across the European market in the event of a hard Brexit.”

“Included in the European numbers are funds raised by 13 Irish companies through venture capital and private equity, amounting to €36.2 million ($41 million)” said Anna Scally. “And while, relatively speaking, these amounts are small, it is encouraging to see Irish fintechs raise capital to enable them to scale internationally.  Among the Irish fintechs that raised funds in 2018 are MyWallSt which raised €3 million – MyWallSt was previously Rubicoin and helps individuals become confident and successful investors. 

Local and global deals

AQMetrics, who provide risk and regulatory reporting software, raised €3 million. AQMetrics were identified by KPMG in 2016 as of the 50 “ones to watch”, so it is great to see them going from strength to strength. Irish Times Innovation Award winners in 2018, Aid:Tech, also raised €1 million, and Supply Finance, which operates in the trade finance area, and is run by Brian Norton who previously ran student loan company Future Finance, also raised €4 million.”

At the global level, deals in the second half of 2018 were topped by Blackstone’s US$17 billion investment in Refinitiv, the US$3.5 billion acquisition of Blackhawk Network by Silver Lake and P2 Capital Partners, the US$3.4 billion buyout of VeriFone by Francisco Partners, and the US$2.2 billion acquisition of iZettle by PayPal. These deals followed on the US$12.86 billion acquisition of WorldPay by Vantiv in H1’18.

Fintech deal volume declined markedly in the second half of 2018, but still reached 2,196 deals for the year, up from 2,165 in 2017.  Increasing geographic diversity of fintech VC funding continues to help drive deal volume, even as larger fintech hubs see more concentrated investment in larger deals. 

2018 Key Highlights

  • European fintech investment for 2018 increased sharply to US$34.2 billion from US$12.2 billion in 2017, thanks to massive M&A and buyout deals, including WorldPay (US$12.8 billion), Nets (US$5.5 billion), iZettle (US$2.2 billion), Fidessa Group (US$2.1 billion), and IRIS Software Group (US$1.75 billion).
  • Mega deals drove a record US$111.8 billion global fintech investment in 2018, led by three US$10 billion+ deals, as well as an additional 14 US$1 billion+ M&A deals.  All told, 2018 was a year of multiple record highs across fintech investment, including VC, corporate VC, M&A and PE.
  • Fintech investment in the Americas rose from US$29 billion in 2017 to US$54.5 billion in 2018. Deals volume also increased from 1,039 deals to 1,245. The US accounted for the bulk of this funding - US$52.5 billion across 1,061 deals.
  • The total Asia Pacific fintech investment for 2018 of US$22.7 billion up from US$12.5 billion in 2017, was dominated by Ant Financial’s record-setting US$14 billion deal in Q2’18, as fintech investment in the region slowed significantly in the second half of the year.
  • Cross-border M&A rose significantly in 2018, with approximately US$53.5 billion invested across borders in 155 deals, up from US$18.9 billion in 153 cross-border deals in 2017. The US drew US$28 billion in cross-border M&A, while Europe attracted US$21.6 billion.
  • Investment flowed at a significant pace into key subsectors and technologies – regtech investment surged to US$3.7 billion in 2018 from US$1.2 billion in 2017, while investment in blockchain remained strong at US$4.5 billion in 2018, just off the US$4.8 billion in 2017.  

Europe sees record annual investment despite decline

European fintech rose exponentially in 2018 to a record US$34.2 billion raised across 536 deals, compared to US$12.2 billion in 2017. Much of the 2018 funding occurred during the first half of the year, with total investment slumping to US$4.3 billion in Q3’18, and to US$1.3 billion in Q4’18 – an eight-quarter low.

The UK’s US$20.7 billion, up from US$5.6 billion in 2017, accounted for the majority of fintech funding for the region– more than half of which came from the US$12.8 billion WorldPay acquisition in the first half of the year. Q3 and Q4’18 investment dropping significantly, suggesting that fintech investors in the UK may have drawn back due to Brexit uncertainties.

Germany and France experienced a drop-off of fintech investment in 2018.  In Germany, US$1 billion was raised across 57 deals, compared to US$1.7 billion across 88 deals in 2017, while France saw US$294 million raised on 34 deals in 2018 versus US$733 million on 50 deals a year earlier. 

US sees record fintech investment and deal volume

US fintech investment for 2018 more than doubled to US$52.5 billion, from US$24 billion in 2017, across a record 1,061 deals. While M&A and buyout activity accounted for the majority of this funding, US-based fintech VC funding also rose significantly, from US$7 billion to US$11.4 billion. The US$17 billion Refinitiv deal dominated the US$25.4 billion investment in Q4’18.

Fintech investment expected to remain strong in 2019

While geopolitical volatility and trade concerns could put a damper on fintech investment in 2019, the strong diversity of global fintech hubs, and the strengthening of subsectors, such as regtech and insurtech, should contribute to continued growth.  AI and automation are expected to remain very hot areas of investor interest at the technology level.

For more information, contact:

Kelli O’Malley
Communications Manager
KPMG Ireland
kelli.omalley@kpmg.ie
Tel: 087 050 4169

© 2019 KPMG, an Ireland partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.

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